STOCKHOLM, Sweden-Russian Communications Minister Leonid Reiman played down fears of already operating foreign investors on the Russian telecom market, saying their equities will not be restricted after the country joins the World Trade Organization (WTO).
However, he said foreign telecom operators that decide to enter the Russian market after the WTO accession may temporarily face such restrictions.
“We are speaking about a transitional period during WTO accession and about temporary restrictions for that period,” the minister specified, adding that the issue is still under consideration. “We are negotiating with partners in London.”
Reiman said some 6,000 companies are currently operating on the Russian telecom market. “The situation for them will not change with the Russian accession to WTO-neither for 100-percent Russian nor for 100-percent foreign companies. But we have certain concerns regarding those companies that decide to enter the Russian market in the future,” he told ITAR-TASS news agency during a visit to Sweden.
Reiman explained that even the biggest Russian companies are small compared with their western competitors. “Their market price is some US$3.5 billion, which is much less than the capitalization of such companies as British Telecom or the U.S. AT&T. With all the respect to those major companies, such a big difference may ruin the situation on the Russian market,” he said.
Foreign shareholders in Russian telecom carriers voiced concern late last year after it became known that Russia plans to limit foreign equities by 25 percent if the carrier operates leased equipment and by 49 percent if it runs its own equipment.
Temporary restrictions on foreign interests in the telecom business exist in many countries of the world. “However, if authorities try to impose them on the existing companies, there will be much ado from foreign investors,” warned Anton Inshutin from Morgan Stanley Dean Witter in Moscow.
Joran Olson, head of the Norwegian Telenor Russian office, said his company had invested more than US$200 million into the Russian telecom business in several years and is a strategic partner of Vimpelcom, in which it has 25 percent plus one share.
“If there are no changes (in restrictions), our company will think much about further investments. All we want is clarity,” he said.
Anton Pogrebinsky from Moscow-based J’son & Partners telecom consultancy believes Reiman somewhat clarified the Russian position, which might calm down the operating shareholders. “However, it is unclear whether operating investors will be allowed to increase their stakes over the mentioned limits, as some of them are planning. Besides, the very word ‘restrictions’ usually scares off potential investors,” he said.
Renaissance Capital consultancy in Moscow echoed by saying: “While we understand the government’s concern over difficult competition . with foreign firms such as AT&T, any decision along the lines suggested by Reiman may bode ill for regional telecoms, as they need strategic investors in order to be able to upgrade their networks to acceptable levels. However, we believe that it is too early to be worried on this front as the detailed mechanism and form for limiting foreign investment is not clear yet.”
